1 July 2008

Mozambique: Australian Company Plans New Coal Mine in Tete By 2010

Maputo — The Australian company Riversdale Mining plans to open its first coal mine in the western Mozambican province of Tete by the end of 2010.

Briefing Mozambican journalists on the company's operations on Tuesday, Riversdale's Country Manager for Mozambique, Syd Parkhouse, said that Riversdale has now obtained licences in Tete covering 290,080 hectares.

At one of these tenements, at Benga, in the Moatize coal basin, there is an inferred reserve of 1.9 billion tonnes of coking coal. Benga only covers around 4,000 hectares. The rest of the area licensed to Riversdale is largely unexplored.

The company has tenements on both banks of the Zambezi, and the area concerned extends to the south bank of Lake Cahora Bassa. With over 280,000 hectares still to explore, it is quite likely that there is more coal in the Riversdale tenements than in the better known area in Moatize licensed to the Brazilian Companhia Vale de Rio Doce (CVRD). The Brazilian concession contains an estimated 2.4 billion tonnes of coal.

Riversdale describes Tete as "the next major coking coal basin". Coking coal is used in steel production, and the main markets are India and China. Riversdale has entered a joint venture with TATA Steel of India, which is the world's sixth largest steel producer, under which the Indian company has taken a 35 per cent stake in licences covering 24,960 hectares (including Benga) for 100 million Australian dollars (about 95 million US dollars).

The key problem for Riverdale, as for CVRD, is how to move the coal from Tete province, hundreds of kilometres in the interior, to the sea. Riversdale plans to use a new coal terminal at the port of Beira, but moving the coal from Tete to Beira requires completion of the reconstruction of the Sena railway line, which was thoroughly destroyed by the apartheid-backed Renamo rebels during the war of destabilisation. At the current pace of work, the line should be ready for use by mid-2009.

The Sena line runs from Beira to Moatize, a distance of over 600 kilometres. For Riversdale's purposes, an entirely new stretch of line must be built from Moatize to Benga.

Parkhouse said that Riversdale has signed a memorandum of understanding with the Mozambican rail and port company, CFM, for use of the port, and a second memorandum with the Beira Railway Company (CCFB) for the use of the Sena line. CCFB is a partnership between CFM and the Indian consortium, Rites and Ircon International, which is rebuilding the line.

The tough question is how much will CCFB charge for Riversdale's use of the Sena line? Negotiations are under way, and Parkhouse was optimistic that, in mutual concessions, "we may end up paying more than we wanted to pay, but less than CCFB is asking".

Beira and the Sena line may not have the capacity to handle all the coal in Tete. A second transport possibility would be to build a railway across Malawi that would link up with the existing line from Malawi to the northern port of Nacala. But that is an ambitious project which Parkhouse thought might cost a billion US dollars.

While Riversdale's main interest is in coking coal, thermal coal would be a secondary product from Benga. Parkhouse said there are plans to involve a second Australian company, Elgas, in constructing a coal fired power station at Benga, with the initial capacity to generate 500 megawatts, but eventually producing 2,000 megawatts.

Since southern Africa has become critically short of electricity (as shown by the rolling power cuts in South Africa earlier this year), the Benga power station would be a welcome addition. Parkhouse said that the latest "clean coal technology", including flue gas desulphurization, would be used, to reduce the emission of gases that contribute to climate change.

"We would be following best practices", said Parkhouse. "We are committed to environmentally friendly practices, and will undertake a full environmental impact assessment to determine the best practices to follow".

Benga is the third major new power station planned for Tete. CVRD also plans a 1,000 megawatt coal-fired power station at Moatize, while a new dam on the Zambezi at Mphanda Nkuwa could generate 1,500 megawatts. All these projects will demand the construction of new transmission lines to carry these large amounts of power.

Pf/ (711)

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